Halifax mortgage bank said house prices in the UK rose by 1% in March and by 2.8% in the first quarter of the year compared with 4.2% in the last three months of 2006.

Halifax believes the trend of rising prices should settle in the coming months as recent house buying conditions have become more subdued.

Halifax group economist Tim Crawford said: “The house price rise in March was the second-smallest monthly increase in prices since last August. Prices continue to rise in a tight market but there are emerging signs that pressure on householders’ finances, partly due to the rise in interest rates since last summer, are dampening housing demand, with evidence of reduced market activity.”